For real health reform, turn the spotlight on specialists’ fees

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Lesley Russell does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

The impact of specialist fees on government and patient budgets has received little reform attention. This is despite the government’s push for controls in health-care spending and growing evidence of the affordability problems faced by sick Australians.

A high-quality specialist sector is an essential component of an effective health-care system; patients rely on specialist doctors when they are sickest and most vulnerable. And when their treatment inevitably involves expensive treatment options. But specialist care in the community is increasingly hard for many Australians to access, due to geography and cost.

In 2011-12, the number of people who reported seeing a medical specialist in the preceding year varied nearly two-fold across Medicare Local populations nationally, from 22% to 42%. But there was no strong association between health status and seeing a specialist. And up to 14% of people reported they had delayed seeing a specialist because of cost.

Keeping track

Many specialists work in both community and hospital settings, sometimes in both public and private hospitals. In private practice, they bill Medicare on a fee-for-service basis. They also negotiate with private health insurance funds to deliver no-gap or known-gap services to privately insured patients.

All this means that tracking specialists’ fees, practice costs, their time and how it’s integrated with that of the doctors-in-training they oversee, their reimbursements from Medicare and private health insurance, and the quality and outcomes from their services is just about impossible.

Medicare Australia provides some data on specialist services, with specific data for obstetrics, anaesthesiology, operations and assistance at operations. But this is data developed solely for administrative and reimbursement mechanisms. Out-of-pocket costs, once provided, are no longer included.

Theoretically, it’s possible to request linked Medicare data for analysis; in practice it’s expensive and time-consuming. There appears to be little interest from the federal bureaucracy in understanding what’s happening in this section and why.

A suitable guide

In 1969, the Gorton government introduced the notion of “the most common fee” – a list based on the fees most commonly charged for over 1,000 medical services. This forerunner of the scheduled fee list was to serve as a guide for health insurance. And each benefit was set so the amount charged to patients should not exceed A$5 (A$1.20 for GP visits).

It’s here the origins of higher pay for specialists over general practitioners, and for procedures over consultations, are found.

Under Medicare, the schedule fees for new and updated items are set by a tripartite tribunal comprising representatives from government, the profession and the community. But there’s never been a legal obligation on doctors to charge the set fee. And the Australian Medical Association has maintained the right of doctors to set their own fees, taking account of their practice costs and earning a living that’s commensurate with their years of training.

The consequences have been predictable and inevitable. And they’ve been made worse by the failure of successive governments to update and modernise the fee schedule, and to index fees appropriately.

Free for all

particularly in wealthier areas, fewer than a third of doctors are still charging the most common fee… Patients are again being forced to pay what the traffic will bear.

The constraint the Medicare Benefit Schedule (admittedly not always successfully) once imposed on specialists’ fees has long disappeared; even the more generous AMA fee schedule, which is indexed annually, is ignored by many. The Royal Australasian College of Surgeons acknowledges some specialists charge as much as ten times the recommended fee.

Unlike general practice, specialists receive no incentives to bulk bill even the most needy of their patients. The result is that bulk billing rates are extremely low (around 27% of specialist services are bulk billed) and patients are paying increasingly large out-of-pocket sums.

In 2012, the average out-of-pocket cost to see a specialist was A$58.20, but this hides a huge variation in cost by both speciality and geography. About 41% of obstetrics services are bulked bill, for instance, but the average out-of-pocket cost is A$218.

Not getting better

The Medicare rebate now covers as little as 16% of the AMA-recommended fee for some common private hospital procedures. Patients with gap cover for specialist Medicare services delivered in private hospitals are largely protected thanks to the generosity of private health insurance fee schedules and the industry’s negotiating power.

But the amount the doctor receives varies tremendously depending on the private health insurance fund, and hospitals and the public are unaware of these differences. There are also accusations that some specialists charge people who have private health insurance more, based on their apparent ability to bear the additional cost.

The Royal Australasian College of Surgeons acknowledges some specialists charge as much as ten times the recommended fee.401(K) 2012/Flickr, CC BY-SA

There’s a lot of anecdotal evidence about what this means for sick Australians and for GPs who struggle to find specialists to accept their patients. It has been reported that some specialists require regular patients to go back to their GPs for new referrals annually. This rejection of “indefinite referral” is not just an impost on busy GPs, it also facilitates the increased charge for a “new” visit.

The AMA says the situation will only get worse due to the freeze on fee indexation and the new safety net arrangements in the 2014-15 Budget.

The last time an Australian government moved to tackle out-of-pocket costs for specialist fees was when Tony Abbott was health minister and introduced the Extended Medicare Safety Net. This provides an additional rebate for people who have out-of-pocket costs for Medicare-eligible out-of-hospital services once an annual threshold in out-of-pocket costs has been reached.

Abbott’s approach was recognisably flawed from the beginning. And it quickly led to inappropriate fee increases by some specialists, forcing successive governments to tinker with the policy to limit cost blow-outs. The majority of safety net benefits now flow to well-off Australians; the policy serves as a salutary lesson on the pitfalls of ad-hoc policy-making.

A sensible approach

So what should be done? The list of issues to be tackled includes:

• More publicly available data and analyses to inform an expert, well-resourced and on-going review of the items and fees on the Medicare Benefits Schedule. To date only about 3% of these items has been reviewed since 2010.

• Investment in a Choosing Wisely focus to assess low- and high-value services and an education and awareness program to ensure that the findings are acted upon. The medical colleges can play a key role here.

• Incentives to address geographic need and affordability. The current situation has led to major inequities in access to health-care services.

• A program to tackle inappropriate variations in services. This will deliver not just cost savings but improved quality.

• More transparency around specialist charges so referring GPs and patients can make informed decisions. This might go so far as to name and shame the extreme outliers.

As Jennifer Doggett and I have previously proposed, tackling these issues will require strong leadership, considerable discussion with all stakeholders and a multifaceted approach. Failure to boldly address these admittedly difficult issues will disadvantage patients, discourage doctors and leave Australia stuck with an inefficient specialist health-care system.